Four sectoral mutual funds in the offing

A private sector move has been initiated to spur the development in infrastructure and energy sector through floating sectoral mutual funds in the country's stock market.

Under the move, first of its kind in the stock market, Prime Bank Ltd, National Bank Ltd and Investment Corporation of Bangladesh (ICB) have come forward to align with the government's efforts to mobilize internal resources.

The finance ministry last week issued a circular about creation of the Bangladesh Infrastructure Finance Fund (BIFF).

The BIFE will issue bonds and debt instruments to local and foreign investors in a bid to raise a fund for financing projects including those of power and infrastructure.

The circular said: "The BIFF will attract investment from local and foreign investors through internationally practised financing options such as bonds, debt instruments and equity offering. It will also invest in different companies that are implementing projects in Bangladesh's infrastructure sector."

Finance ministry officials said, of the Tk 210 billion kept for public-private partnership (PPP) projects in the revised budget of the current fiscal year, Tk 16 billion will go to the fund as its initial capital. This is the first-ever allocation to be used for PPP projects.

All the above mutual funds are aimed to develop the infrastructure sector as country's stock market lacks instruments for the development of the key economic segment.

"Infrastructure fund has already emerged as an effective capital market instruments for funding large projects in other emerging markets of the world including India, so in case of Bangladesh, this is obviously a welcome move," Salahuddin Ahmed Khan, a Dhaka University professor of Finance Department told the FE.

He said the present market size is very negligible as far as mutual funds are concerned.

When contacted, president of Dhaka Stock Exchange (DSE) Shakil Rizvi said though the proposed size is small to develop country's poor infrastructure, but definitely the move is a starter.

"We must welcome floatation of such mutual funds, but the utilisation of investors' money in proper areas should be ensured," Mr Rizvi added.

Chairman of ICB M Khairul Hossain similarly hailed the new move.

"We have already approved the two new mutual funds in a board meeting," Mr Khairul said.

At present, there are 26 mutual funds in the country whose asset value is only 1.40 per cent of the total market capitalization.

In India and Pakistan, the asst values of mutual funds are 14 per cent and 9 per cent respectively.

"The entry of such funds is part of the progressing trend towards a very bright future for capital market of Bangladesh through professional fund management," Moin Al Kashem, Managing Director & CEO of Prime Finance Asset Management said.

Prime Bank proposed to subscribe at least 10 per cent of the fund and rest will be raised through Pre-IPO placement and IPO subject to the approval from the regulatory authorities.

With the face value of Tk ten each, the total units of the proposed fund will be 500 million having a ten-year's maturity.

Market operators sought cooperation from the SEC to assess the application with a 'distinctive note' as it was the first mutual fund in a sector-wise perspective.